Acquisition reflects Walgreens' new thinking

THE WALGREENS/ DUANE READE DEAL

Already considered by many to be the industry’s premier drug chain, Walgreens has evolved over the past few years into a company that is reshaping the way Americans think of health care services. Through a series of acquisitions and mergers, Walgreens has become a provider of a wide array of pharmacy services, extending its reach well beyond the prescription drug counters in its stores.

With what is perhaps the most comprehensive pharmacy offering in the country, Walgreens operates specialty pharmacies, long-term care pharmacies, a prescription benefits management company, a thriving mail-order service and several work site pharmacies.

And while Walgreens has cut back on the pace of new store openings — a few years ago the company was launching a new unit every 17 hours — it has not lessened its efforts to revamp its store base.

A new merchandising initiative, dubbed Customer-Centric Retailing (CCR), is changing the mix on Walgreens’ shelves, offering shoppers more of the products they want in an easier-to-shop setting. The concept, which began with 35 test stores, has since been introduced into more than 400 units in Texas, and company executives say that CCR will be rolled out in other markets as the year progresses.

The initiative, they add, is the perfect example of a win-win situation. Not only is CCR expected to make shopping Walgreens stores a more pleasant experience for customers, it also is going to help drive the company’s bottom line.

“Over time, we believe these improvements will translate into more frequent customer visits and larger market basket sizes,” president and chief executive officer Greg Wasson said last year. “As well, CCR stores are more efficient to operate with lower invested capital.”

Efficiency has been at the heart of Walgreens’ transformation effort, and with that in mind, the chain has incorporated a new pharmacy program in which prescriptions for maintenance drugs are filled at central locations and shipped to stores for pickup.

Executives say the new program will save the company millions of dollars a year.
Called POWER, the scheme has already been incorporated into the pharmacy operations of nearly 1,100 stores in Florida and Arizona.

Executives estimate that the program can reduce a pharmacist’s workload by as much as 60%, freeing him or her up to spend more time with patients.

“Community pharmacy cannot go forward as it exists today,” Wasson noted recently. “It is imperative that we, as an industry, begin leveraging the power of pharmacists by giving them more access to the patient, by freeing them up to spend more time in a consulting role and by effectively communicating the importance of this new role to our pharmacists.

“What’s needed is a new health care model, one that produces revenue not only for providing product but for providing health care services as well.”

As Walgreens continues charting its path to the future, it is doing so amid what some see as the most uncertain economic period since the Great Depression — a situation that has caused many companies to have second thoughts about remaking themselves.

“Challenging times can pre­sent significant business opportunities for strong companies like ours,” Wasson pointed out. “We believe we are well positioned to emerge as a leader in pharmacy, health and wellness services.”